The U.S. Treasury Department and IRS today released for publication in the Federal Register final regulations (T.D. 9819) concerning the streamlined process of applying for recognition of section 501(c)(3) status.
Today’s regulations [PDF 224 KB] finalize regulations that were proposed in July 2014 and remove corresponding temporary regulations. The final regulations allow the IRS Commissioner to adopt a streamlined application process for eligible organizations to apply for recognition of section 501(c)(3) tax-exempt status. The preamble to the final regulations states that the proposed regulations were adopted “without substantive changes.”
An entity seeking exemption from federal income tax as an organization described in section 501(c)(3) generally is required to apply to the IRS on Form 1023, Application for Recognition of Exemption.
In 2014, the IRS released Form 1023-EZ, Streamlined Application for Recognition of Exemption, to provide a less burdensome alternative for small organizations applying for recognition of exemption.
The preamble to today’s final regulations explains that the IRS is continuing to consider improvements to Form 1023-EZ based on its own experience and on informal comments received from the public and other stakeholders. For instance, the IRS is considering whether to require applicants to submit a brief statement of actual or proposed activities. Because the 2014 proposed regulations contemplated that guidance would set forth information to be required of Form 1023-EZ filers, the Treasury and IRS have concluded that the proposed regulations are sufficiently flexible to allow such a revision to the Form 1023-EZ at a future date.
The final regulations also amend the requirement that an organization claiming to be exempted from filing annual returns is to file a statement supporting its claim (with the statement being filed as a part of its application). Now an organization can file such a statement either in its application or by filing Form 8940, Request for Miscellaneous Determination.
The final regulations will be published in the Federal Register and are effective on June 30. However, the final regulations (T.D. 9819) provide that because the now-removed temporary regulations have applied since July 1, 2014, and the proposed regulations that cross-referenced the text of those temporary regulations were adopted without substantive change, the final regulations apply on and after July 1, 2014.
For more information, contact a tax professional with KPMG’s Washington National Tax practice:
Alexandra Mitchell | +1 202 533 6078 | firstname.lastname@example.org
Randall Thomas | +1 202 533 3786 | email@example.com
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